Evaluation of performance, merit rating, or annual review... The idea of a merit rating is alluring. the sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise.
In the introduction to the Team Handbook Dr. Deming wrote:
The fact is that the system that people work in and the interaction with people may account for 90 or 95 percent of performance.
From page 296 of the Leader's Handbook
Someone in the audience asked Dr. Deming: "if we eliminate performance appraisals, as you suggest, what do we do instead?" Dr. Deming's reply: "Whatever Peter Scholtes says."
The idea of eliminating performance appraisals is one of Deming's ideas people have the most difficulty with. I can't convince anyone of the merit of this idea here. For years I thought this was one idea Deming just got wrong; but now I believe he was right. I suggest what Deming suggested, listen to Peter Scholtes: read chapter 9 of the Leader's Handbook - Performance without Appraisal.
Incentive Pay Considered Harmful, Joel Spolsky:
If you're in this position, the only way to prevent teamicide is to simply give everyone on your team a gushing review. But if you do have any choice in the matter, I'd recommend that you run fleeing from any kind of performance review, incentive bonus, or stupid corporate employee-of-the-month program.
Dr. W. Edwards Deming's management ideas have greatly influenced modern management practice. Many quotes and thoughts are attributed to W. Edwards Deming's system of management. Sometimes these represent his ideas accurately, and sometimes they do not. Here I attempt to clearly indicate what he actual said and include some of my thoughts on what he meant.
Deming on Management